Goods Orders, Home Sales Probably Climbed: U.S. Economy Preview
May 23 (Bloomberg) -- Orders for factory goods, sales of new and existing homes and consumer spending probably climbed in April, indicating the U.S. recovery was strengthening before the European debt crisis rattled global financial markets, economists said reports this week may show.
Bookings for durable goods increased 1.5 percent, according to the median of 60 estimates in a Bloomberg News survey ahead of a Commerce Department report May 26. Combined sales of new and existing homes last month probably rose 5.5 percent to an annual rate of 6.08 million, while household purchases probably rose for a seventh month, other surveys showed.
“We’re in the early stages of a lasting recovery,” said David Resler, chief economist at Nomura Securities International Inc. in New York. “We had been leaning toward raising our growth forecasts, but the financial turmoil has given us pause to delay any upgrade.”
The plunge in shares may undermine confidence, limiting gains in exports and business spending that have propelled the biggest rebound in factory production in a decade. Housing, which has bounced back this quarter thanks to a government tax incentive and better weather, may also cool in the second half of the year as unemployment hovers around 10 percent.
The projected rise in durable goods orders would follow a 1.2 percent decline in March that was driven by a 67 percent plunge in civilian aircraft orders. Boeing Co., the world’s second-biggest commercial-plane maker, said it received 34 orders in April, down from 43 a month earlier.
Exports, Inventories
Rising exports, the need to replenish depleted inventories and spending on new equipment and software are generating production gains that are leading the economy out of its worst recession in seven decades. Factory production climbed 6 percent in the 12 months to April, the biggest over-over-year increase since April 2000.
Government stimulus funding for energy efficiency and infrastructure projects is also spurring orders.
Honeywell International Inc., maker of the iconic “round thermostats,” expects more stimulus-related revenue this year at its Building Solutions unit as some of the almost $20 billion in government money earmarked for energy-efficiency projects becomes more accessible.
Stimulus Funds
Building Solutions has about $100 million in stimulus- financed orders scheduled for delivery in the next 24 months, unit president Paul Orzeske said in an interview this month.
“We’ve got a lot in our funnel, in our pipeline of new business and projects,” and the portion of orders supported by federal stimulus money has increased “significantly,” he said.
The rebound in manufacturing has helped shares of machinery makers outperform the broader market, even after the recent plunge on concerns the European debt crisis will slow growth.
The Standard & Poor’s Supercomposite Industrial Machinery Index of 52 companies, including Caterpillar Corp. and Briggs & Stratton Corp., has increased 5.7 percent this year compared with a 2.5 percent decline in the broader S&P 500. The 500 Index has lost 11 percent since reaching a 19-month high on April 23.
“The continued sharp erosion in financial conditions has revived the very small chance of a very big disappointment for the path of economic recovery,” economists at Citigroup Global Markets Inc. in New York, headed by Robert DiClemente, wrote in a May 21 note to clients. “If not reversed, the recent setbacks in credit and equity markets would signal subpar growth and only limited gain in employment.”
The recovery from the worst housing slump since the Great Depression has been more uneven and largely driven by the timing of a government homebuyer tax credit worth as much as $8,000. The program covers closings through June as long as contracts were signed by the end of April.
Home Sales
Sales of previously owned homes probably rose 5.6 percent in April to a 5.65 million-unit annual pace, according to the survey ahead of the National Association of Realtors’ report tomorrow.
A report due two days later from the Commerce Department may show purchases of new houses rose 3.4 percent to a 425,000 rate last month, according to the survey median.
Bolstered by an improving job market and tax refunds, consumers increased spending in April by 0.3 percent after a 0.6 percent gain the prior month, economists forecast the Commerce Department will report May 28. Personal income probably rose 0.4 percent after a 0.3 percent gain the prior month.
Consumers probably became more optimistic in May as the outlook for employment improved after the economy generated 290,000 new jobs in April, the most in four years. The Conference Board’s confidence index probably rose to 59 this month, the highest level since September 2008, economists forecast before the May 25 report.
Finally, the Commerce Department will probably report the economy grew at a 3.4 percent pace in the first quarter, more than the 3.2 percent rate it estimated last month in an advance report as consumer spending improved more than initially calculated. Those figures are due May 27.
Bloomberg Survey
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Release Period Prior Median
Indicator Date Value Forecast
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Exist Homes Mlns 5/24 April 5.35 5.65
Exist Homes MOM% 5/24 April 6.8% 5.6%
Case Shiller Monthly MO 5/25 March -0.1% -0.3%
Case Shiller Monthly YO 5/25 March 0.6% 2.5%
Consumer Conf Index 5/25 May 57.9 59.0
Durables Orders MOM% 5/26 April -1.2% 1.5%
Durables Ex-Trans MOM% 5/26 April 3.7% 0.5%
New Home Sales ,000’s 5/26 April 411 425
New Home Sales MOM% 5/26 April 26.9% 3.4%
GDP Annual QOQ% 5/27 1Q S 3.2% 3.4%
Personal Consump. QOQ% 5/27 1Q S 3.6% 3.7%
GDP Prices QOQ% 5/27 1Q S 0.9% 0.9%
Core PCE Prices QOQ% 5/27 1Q S 0.6% 0.6%
Initial Claims ,000’s 5/27 22-May 471 455
Cont. Claims ,000’s 5/27 15-May 4625 4600
Pers Inc MOM% 5/28 April 0.3% 0.4%
Pers Spend MOM% 5/28 April 0.6% 0.3%
PCE Deflator YOY% 5/28 April 2.0% 1.9%
Core PCE Prices MOM% 5/28 April 0.1% 0.1%
Core PCE Prices YOY% 5/28 April 1.3% 1.1%
Chicago PM Index 5/28 May 63.8 61.3
U of Mich Conf. Index 5/28 May F 73.3 73.4
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source: bloomberg.com
